Nick Scali Ltd (ASX: NCK) shares have had a rough run in 2026.
On Thursday, the ASX 200 stock hit a 52-week low of $13.70. That leaves the furniture retailer's share price down around 40% this year.
I can understand why some investors are cautious.
Consumer spending is under pressure, interest rates remain a key concern, and the housing market outlook has become more uncertain following the Federal Budget. Furniture is also a big-ticket category, so demand can be sensitive to household confidence.
Even so, I think Nick Scali could be a top buy at current levels for patient investors.
Image source: Getty Images
The valuation looks attractive
The first thing that stands out is the valuation.
According to CommSec, consensus estimates are for Nick Scali to generate earnings per share of 98.7 cents in FY26, $1.02 in FY27, and $1.13 in FY28.
Based on a share price of $13.70, that puts the stock on around 13.4 times estimated FY27 earnings.
That looks very reasonable to me for a retailer with a strong brand, high margins, a net cash balance sheet, and a long store rollout opportunity.
The dividend outlook also looks useful.
CommSec consensus estimates point to fully-franked dividends per share of 78.1 cents in FY26, 79 cents in FY27, and 84.7 cents in FY28. At $13.70 per share, that implies forecast dividend yields of around 5.7%, 5.8%, and 6.2%, respectively.
Those dividends are not guaranteed. But if Nick Scali can deliver something close to those numbers, investors would be collecting a meaningful income stream while waiting for sentiment to recover.
A strong brand in a difficult category
Furniture retail is not an easy market.
Customers can delay purchases when money is tight. Housing turnover can affect demand. Competition is always there.
But Nick Scali has spent years building a premium brand with a clear position in the market.
I think that is important because furniture is a category where trust, style, quality, and showroom experience can all influence the buying decision. The company is not simply competing on the lowest price.
The latest half-year update gives a sense of the underlying strength. In Australia and New Zealand, written sales orders rose 10.5% in the first half, while revenue increased 13.1% and gross margin improved to 65.9%.
I do not think investors need to buy the stock because of one half-year result. But those figures suggest the core ANZ business was still performing well earlier in the year despite a tougher consumer backdrop.
The UK could be the longer-term swing factor
The bigger opportunity may be offshore.
Nick Scali has been working through its UK rebranding and refurbishment program, and that has weighed on near-term performance. Store closures during the process affected revenue, and the UK business still made a loss in the first half.
But I think investors should look at what the company is trying to build.
The UK gives Nick Scali a much larger market to attack over time. The company has indicated a long-term opportunity of 60 to 70 UK stores, compared with 19 at the end of December.
There are encouraging signs. With the refurbishment program mostly complete, management said material improvements were being seen in written sales compared with the prior year. In January, total UK written sales were $6.7 million, and four Nick Scali branded stores trading on a like-for-like basis were up 32%.
That does not mean the UK expansion will be smooth. It may take time, money, and patience. But if the format works, it could become a major growth driver over the next decade.
Foolish Takeaway
This ASX 200 stock has fallen hard, and the near-term outlook is not risk-free.
Consumer spending could remain challenged, and uncertainty around housing may continue to weigh on sentiment toward furniture retailers.
But at around 13.4 times estimated FY27 earnings, with forecast dividend yields above 5%, I think a lot of caution is now reflected in the share price.
Nick Scali still has a strong brand, high margins, a net cash position, and a clear offshore growth opportunity.
For investors willing to look beyond the current weakness, I think this ASX 200 stock could be a top buy at its 52-week low.
